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Advanced Oncotherapy (AIM: AVO), the developer of next-generation proton therapy systems for cancer treatment, announces that a circular convening the Company’s General Meeting to be held at the Royal Institute of British Architects, 66 Portland Place, London W1B 1AD at 10:00am on Tuesday, 23 January 2018, in relation to the transactions announced on 7 December 2017 has been posted to the shareholders of the Company.

Some of the details of the Conversion and the Placing, including the number of shares to be issued thereof, have changed marginally. The full terms of the Conversion and the Placing are set out in the Chairman’s Letter included in the Circular, the full text of which is set out at the end of this document.

Capitalised terms used in this announcement but not defined have the same meaning as in the Circular which has been posted to shareholders. 

For further information, please contact:

About Advanced Oncotherapy Plc www.avoplc.com

Advanced Oncotherapy is a provider of particle therapy with protons that harnesses the best in modern technology. Advanced Oncotherapy’s team “ADAM”, based in Geneva, focuses on the development of a proprietary proton accelerator called Linac Image Guided Hadron Technology (LIGHT). LIGHT’s compact configuration delivers proton beams in a way that facilitates greater precision and electronic control which is not achievable with older technologies.

Advanced Oncotherapy will offer healthcare providers affordable systems that will enable them to treat cancer with an innovative technology as well as lower treatment related side effects.

Advanced Oncotherapy continually monitors the market for any emerging improvements in delivering proton therapy and actively seeks working relationships with providers of these innovative technologies. Through these relationships, the Company will remain the prime provider of an innovative and cost-effective system for particle therapy with protons.

LETTER FROM THE CHAIRMAN

Advanced Oncotherapy plc

(Incorporated and registered in England and Wales under the Companies Act 1985 with registered number 5564418)

Directors

Dr Michael Sinclair, Executive Chairman

Michael Bradfield, Non-executive Director

Hans von Celsing, Non-executive Director

Prof. Stephen Myers, Non-executive Director, Executive Chairman of ADAM

Prof. Chris Nutting, Non-executive Director

Sanjeev Pandya, EVP, Global Business Development

Dr Nicholas Plowman, Non-executive Director

Nicolas Sérandour, Chief Executive Officer

Dr Euan Thomson, Non-executive Director

Dr Enrico Vanni, Non-executive Director

22 December 2017

Dear Shareholder,

Proposed Authority to Allot Shares and Disapply Pre-emption Rights

Notice of General Meeting

1.       Background

The Company announced on 7 December 2017 that it had entered into an exclusive distribution agreement pursuant to which Yantai Cipu was appointed as AVO’s exclusive distributor to import, market and distribute proton therapy products manufactured by AVO and its affiliates, including the Company’s LIGHT systems , on an exclusive basis across China, Macau, Taiwan, Hong-Kong and South Korea.

Pursuant to the terms of the Distribution Agreement, Yantai Cipu has agreed to pay to the Company an initial licence fee of £16,500,000 on Admission.

Yantai Cipu has also agreed to invest £13,500,000 in the Company by subscribing for 45 million Ordinary Shares in AVO at a price of £0.30 per share.  The Subscription is subject to several conditions, including Resolution 1 being approved by Shareholders at the General Meeting and the receipt of Government Approval for the transfer of the Subscription Monies from China. Further details of the terms of the Subscription Agreement are set out in section 1 of Part II of this circular. 

As the Company announced on 7 December 2017, it has raised a further £3,260,635 by a conditional placing of 10,868,782 new Ordinary Shares at the Subscription Price, such Placing being conditional upon the passing of Resolution 1 and completion of the Subscription. Executive Directors Dr. Michael Sinclair, Prof. Stephen Myers, Nicolas Sérandour, and Non-Executive Directors Dr. Enrico Vanni and Dr. Nicholas Plowman have agreed to participate in the Placing by subscribing, in aggregate, for 4,279,050 Ordinary Shares at the Subscription Price, representing £1,283,715 of the total amount raised.

Finally, conditional upon completion of the Placing and the Subscription, the Lenders have agreed to accept 13,697,697 new Ordinary Shares in full settlement of the Loan.  Interest accruing on the principal amount of the Loan between 1 January 2018 and Admission will be settled by the Company in cash.

The purpose of this circular is to explain the background to the Transactions and why the Board believes them to be in the best interests of the Shareholders as a whole and recommends that you vote in favour of the Resolutions.

Following completion of the Transactions, the total number of Ordinary Shares in issue will be 150,501,673 (assuming no conversion by third parties of existing rights to acquire Ordinary Shares) and Yantai Cipu will hold 29.90% of the enlarged issued share capital of the Company.

Pursuant to the terms of the Distribution Agreement, the Company has also agreed to issue to Yantai Cipu 500,000 Warrants to subscribe for Ordinary Shares in respect of each binding purchase agreement for the sale of a LIGHT system in the Territories, up to a maximum of eleven purchase agreements.  The Warrants will be exercisable for five years after the date of issue at an exercise price equal to 130% of the one-month average share price prevailing on the date of final payment for each relevant LIGHT system.

In order to ensure the Company can carry on operations independently of Yantai Cipu and that transactions entered into between Yantai Cipu or its associates and the Company will be on arm’s length terms and on a normal commercial basis, the Company has entered into an agreement which will regulate the relationship between Yantai Cipu and the Company, if and for so long as Yantai Cipu exercises Control (the “Relationship Agreement”). 

Pursuant to the terms of the Relationship Agreement, for so long as Yantai Cipu is entitled to exercise, or control the exercise of, more than 20% of the voting rights attaching to the Ordinary Shares in issue from time to time, Yantai Cipu will be entitled to appoint to the Board such number of non-executive directors as equals the same percentage of all Directors as its percentage ownership of Ordinary Shares, rounded down to the nearest whole number.  Accordingly, if the Subscription becomes unconditional, Yantai Cipu shall be entitled to appoint two non-executive directors to the Board from Admission.  Subject to completion of the requisite due diligence procedures for the appointment of directors to the board of an AIM company and to the approval of the Company’s Nominated Adviser (which is a requirement of any such appointment), it is expected that Mrs. Zhang RenHua and Mr. Chunlin Han will join the Board of AVO.  A further announcement regarding these appointments will be made in due course.

Shareholders should be aware that the funds committed by Yantai Cipu are not currently in the United Kingdom and the receipt of these funds is subject to approval from the Government of the People’s Republic of China for the transfer of the Subscription Monies to the United Kingdom. If such approval is not obtained by the Long Stop Date (subject to extension only as the result of a Force Majeure Event, as further described in section 1 of Part II of this circular), then the Transactions will not proceed.

A summary of the key terms of the Subscription Agreement, the Distribution Agreement and the Relationship Agreement is set out in Part II of this circular. 

2.       Rationale and Use of Proceeds

As part of its strategy to deliver an affordable proton therapy system that addresses the needs of patients, operators and payors, AVO has long recognised that the People’s Republic of China represents a significant opportunity for the Company with its potential need for a significant number of proton therapy centres.  Accordingly, the Board determined that finding a cornerstone investor with relevant local experience would be an important step for the Company.  The Company is therefore delighted to be partnering with Yantai Cipu as the exclusive distributor of the LIGHT system in the Territories. The Subscription is consistent with AVO’s strategy of focussing its resources on the technological development of the first LIGHT system and seeking to establish partnerships with businesses that have good market access and relevant expertise in their own geographies. Together, the Company and Yantai Cipu intend to explore opportunities to manufacture parts of the LIGHT system in the Territories and the Board believes the Company will benefit greatly from the knowledge and contacts of the Han family, who ultimately owns Yantai Cipu.

In due course, the Board is confident that there will be high demand for the Company’s products in the Territories, particularly as high-performance medical equipment has been listed as one of the areas to receive support in the People’s Republic of China’s 13th Five-Year Plan for Economic and Social Development (2016-20).

In addition to providing local knowledge and contacts, Yantai Cipu is making a significant equity investment in the Company.  In association with Yantai Cipu’s Subscription, other investors have agreed to subscribe for 10,868,782 million Ordinary Shares at the Subscription Price to raise a total from the Subscription and the Placing of £16,760,635, before expenses.  Conditional upon completion of the Subscription and the Placing, the Lenders have agreed to accept repayment of the Loan in return for the issue to them of the Conversion Shares, thereby reducing the Company’s debt.

It was important to the Board that the dilution of existing shareholders was limited and for this reason the agreement with Yantai Cipu was structured in such a way that the Company will benefit from an additional non-dilutive source of funding in the form of the £16,500,000 Initial Licence Fee.

The participations by Yantai Cipu and other investors (including certain Directors) in the Subscription and the Placing, and their resulting holdings in the enlarged share capital of the Company on Admission, will be as follows:

Following Conversion of the Loan, the Lenders will hold, in aggregate, 19,129,291 Ordinary Shares, representing 12.7% of the enlarged share capital of the Company on Admission, and 15,600,000 warrants to subscribe for Ordinary Shares.

A total of 150,501,673 Ordinary Shares will be issued pursuant to the Transactions.  In addition, pursuant to the terms of the Distribution Agreement, Yantai Cipu will be potentially entitled to receive Warrants to subscribe for up to 5,500,000 Ordinary Shares on the terms summarised in section 3 of Part II of this circular.

The Directors believe that the Transactions provide the funding foundations necessary to allow the Company to focus on making its proton therapy technology available to patients around the world. These funds will allow the Company to progress towards production and installation of its first LIGHT system in Harley Street, London, and will also be allocated for general working capital purposes. 

3.       General Meeting and Resolutions

The Board is seeking shareholder authority for the issue of equity securities in relation to the Transactions and additional authority for general use.

At the end of this document is a notice convening the General Meeting to be held at the Royal Institute of British Architects, 66 Portland Place, London W1B 1AD on Tuesday, 23 January 2018 at 10.00 a.m. at which the Resolutions will be proposed.

Resolution 1 provides authority to the Board, pursuant to sections 551 and 570 of the Companies Act 2006, to allot the Subscription Shares, the Placing Shares, the Conversion Shares and the Warrants. In the event that Resolution 1 is not passed, the Transactions will not proceed.

Resolutions 2 and 3 provide additional authority to the Board, pursuant to sections 551 and 570 of the Companies Act 2006, to allot Ordinary Shares and grant rights to subscribe for such shares.

Resolution 2 will permit the issue of Ordinary Shares pro rata to existing Shareholders and the issue of Ordinary Shares otherwise than to existing Shareholders for non-cash consideration.  The number of Ordinary Shares that may be issued pursuant to the authority in Resolution 2(b) will be limited to such number of Ordinary Shares as has an aggregate nominal value of £7,525,083.50, which equates to approximately 20% of the Company’s enlarged issued share capital on Admission. This authority will expire at the conclusion of the Annual General Meeting of the Company to be held in 2018, unless previously renewed, varied or revoked by the Company in general meeting.

Resolution 3 disapplies pre-emption rights in relation to the issue of Ordinary Shares under the authority granted by Resolution 2(b) such that such shares can be offered other than pro rata to existing Shareholders. The number of Ordinary Shares that may be issued pursuant to this authority will be limited to such number of Ordinary Shares as has an aggregate nominal value of £5,643.812.50, which equates to approximately 15% of the Company’s enlarged issued share capital on Admission. The authority granted under Resolution 3 will also expire at the conclusion of the Annual General Meeting of the Company to be held in 2018, unless previously renewed, varied or revoked by the Company in general meeting. 

The authorities sought at the General Meeting will replace the general authorities granted by resolutions 2 and 3 passed at the general meeting of the Company held on 31 March 2017.  They will not, however, replace the authority granted in resolution 1 passed at that meeting, which approved the Bracknor facility announced by the Company on 22 February 2017.  As previously announced, however, the Company does not intend to draw down further funds under the Bracknor facility.  The new authorities are being sought specifically to allow the Company to complete the Transactions and to enable the Board to take advantage of future business opportunities as they arise. 

Application for Admission will only be made following the passing of Resolution 1 at the General Meeting and receipt of Government Approval for the transfer of the Subscription Monies. 

4.       Action to be taken by Shareholders

A Form of Proxy for use by Shareholders in connection with the General Meeting is enclosed. Shareholders are requested to complete and return the Form of Proxy in accordance with the instructions printed on to the Company’s Registrars, Link Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU as soon as possible, but in any event no later than 10.00 a.m. on Sunday, 21 January 2018. 

CREST members may appoint proxies by using the CREST electronic proxy appointment service and transmitting a CREST Proxy Instruction in accordance with the procedures set out in the CREST Manual so that it is received by Link Asset Services (under CREST ID: RA10) by no later than 10.00 a.m. on Sunday, 21 January 2018. The time of receipt will be taken to be the time from which Link Asset Services is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. 

Completion and return of a Form of Proxy or transmitting a CREST Proxy Instruction will not prevent a Shareholder from attending the General Meeting and voting in person should he or she wish to do so. 

5.       Recommendation

Your Directors believe completion of the Transactions and approval of the Resolutions to be proposed at the General Meeting are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board recommends that you vote in favour of the Resolutions as the Directors who hold shares in the Company intend to do in respect of their own beneficial shareholdings amounting, in aggregate, to 17,523,348 existing Ordinary Shares, representing approximately 21.70% of the issued share capital of the Company at the date of this circular.

Yours faithfully 

Dr Michael Sinclair

Executive Chairman